Correlation Between Vanguard USD and SPDR Dow
Can any of the company-specific risk be diversified away by investing in both Vanguard USD and SPDR Dow at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vanguard USD and SPDR Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard USD Treasury and SPDR Dow Jones, you can compare the effects of market volatilities on Vanguard USD and SPDR Dow and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vanguard USD with a short position of SPDR Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard USD and SPDR Dow.
Diversification Opportunities for Vanguard USD and SPDR Dow
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and SPDR is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard USD Treasury and SPDR Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Dow Jones and Vanguard USD is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vanguard USD Treasury are associated (or correlated) with SPDR Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Dow Jones has no effect on the direction of Vanguard USD i.e., Vanguard USD and SPDR Dow go up and down completely randomly.
Pair Corralation between Vanguard USD and SPDR Dow
Assuming the 90 days trading horizon Vanguard USD is expected to generate 5.32 times less return on investment than SPDR Dow. But when comparing it to its historical volatility, Vanguard USD Treasury is 1.63 times less risky than SPDR Dow. It trades about 0.03 of its potential returns per unit of risk. SPDR Dow Jones is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 29,914 in SPDR Dow Jones on September 13, 2024 and sell it today you would earn a total of 12,361 from holding SPDR Dow Jones or generate 41.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard USD Treasury vs. SPDR Dow Jones
Performance |
| Timeline |
| Vanguard USD Treasury |
| SPDR Dow Jones |
Vanguard USD and SPDR Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard USD and SPDR Dow
The main advantage of trading using opposite Vanguard USD and SPDR Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard USD position performs unexpectedly, SPDR Dow can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SPDR Dow will offset losses from the drop in SPDR Dow's long position.| Vanguard USD vs. SPDR Dow Jones | Vanguard USD vs. iShares Core MSCI | Vanguard USD vs. iShares SP 500 | Vanguard USD vs. iShares Core MSCI |
| SPDR Dow vs. SPDR MSCI World | SPDR Dow vs. SPDR SP Dividend | SPDR Dow vs. SPDR SP 500 | SPDR Dow vs. SPDR BB SB |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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